[WSJ] Medical Costs Register First Decline Since 1970s

I know people want to give Obamacare credit and I'm not saying I'm unwilling to. I'm saying, show me one thing that is bending the curve that ties to Obamacare. Northside posted good information about the cost of prescriptions being bent because of the patent issue. Very good information, has nothing to do with Obamacare, but that legislation will get credit for the reduction in cost.

 

I'm in the same boat. I don't really see Obamacare having accomplished that much yet. A lot of the law hasn't even gone into effect yet.

 

From the PWC report released earlier this week.

http://www.bloomberg.com/news/2013-...h-slows-further-even-as-economy-rebounds.html


Provisions in the Affordable Care Act that penalize hospitals for excessive readmissions and encourage employers to offer wellness programs are slowing the growth of U.S. medical costs, even as the economy rebounds.
President Obama Speaks About Affordable Care Act

Health-care costs for commercial insurers and employers are expected to rise about 4.5 percent next year after accounting for changes in benefits, PricewaterhouseCoopers LLP said in a report today. The increase is a percentage point less than what the consulting company projected for 2013.

The report cited the positive effect of provisions in the health-care law that reduced hospital readmissions by 70,000 in 2012 and lowered premiums for people in employer-sponsored smoking cessation or chronic-disease management programs. The report supports President Barack Obama’s contentions that the 2010 law has contributed to historically slow cost growth.

“It’s picking up speed and force,” said Ceci Connolly, managing director of PwC’s Health Research Institute in Washington. Provisions such as the readmission penalties “will be having a measurable impact across the health system.”

This is one of the many provisions in the law designed to deal with the cost curve that is being implemently slowly and is partly experimental. You'll hopefully see more and more of these types of things as the years go by and the experiments that are successful are implemented nationwide.

 

Memorial Hermann charged $31,000 for my wife's emergency appendectomy ("emergency"; is there really another kind of appendectomy?) The emergency center we went charged a pretty big buttload, too.

Thank God for insurance, so my bank account was "only" $6,000-ish lighter, all said and done, but if you look at the way hospitals and emergency centers charge for their services---look at the itemized bills---it's beyond a travesty. Downright theft. And no one does anything about it.

So I can't go "yay, whee!" here.

 

One of the experiments in the Obamacare bill is trying out the idea of bill-by-outcome instead of bill-by-procedure. No proof it will work, so it would be silly to implement it nationwide from the start, but it's something that health care economists believe can help the system and reduce costs, along with simplifying billing.

http://www.nytimes.com/2013/05/26/opinion/sunday/friedman-obamacares-other-surprise.html?_r=0


Obamacare is based on the notion that a main reason we pay so much more than any other industrial nation for health care, without better results, is because the incentive structure in our system is wrong. Doctors and hospitals are paid primarily for procedures and tests, not health outcomes. The goal of the health care law is to flip this fee-for-services system (which some insurance companies are emulating) to one where the government pays doctors and hospitals to keep Medicare patients healthy and the services they do render are reimbursed more for their value than volume.

 

That's a start but the ACA really doesn't do a whole lot to ultimately do massive cost control. Pilot projects are nice but there's a fundamental economic problem at work.

We have an insurance industry that has an incentive to reduce hospital costs. After all they're the ones actually stuck paying the big bills. So naturally they'll do their best to negotiate prices downward. In fact if you remember in the 90s, they did a reasonable job. (at least reasonable in comparison to the status quo) But in doing so, they created very strict hospital and doctor networks and reinforced the image of big insurance denying "doctor choice."

But there lies the paradox. If you want insurance companies to give you access to any doctor, you give all the leverage to doctors. Our insurance networks are huge now and cover most hospitals and doctors. Patients have way more choice than they did in the 90s but it came at the cost of reducing insurance company leverage when making contracts with hospitals.

The other problem is that ever since the 90s (when insurance companies started consolidating to increase their negotiating leverage), hospitals started doing the same. We now have one of the narrowest hospital networks in history. Hospitals left and right are combining in an effort to preserve higher prices by threatening to deny insurance companies access to large hospital networks (which is a problem since patients want access to every hospital)

In addition to that, you see it in the pharmaceutical industry too. Insurance companies have an incentive to make people use generic drugs. If it were up to them they'd only let us buy generics (unless there was no generic available) But patients are deluded with idiotic tv ads that create the perception that generics are somehow inferior to big pharma's drugs. So they demand access to name brand stuff. Insurance companies came up with a workaround by charging drug copays and lowering the copay on generic drugs. Pharmaceuticals came back with drug coupons and programs to essentially pay off doctors to only recommend the name brand drug. This is the same idiotic game that the insurance companies and hospitals are paying.



Bottom line, the ACA made great efforts to reform insurance but did NOTHING to reform the drug industry or the hospital industry and all both of those are as bad if not worse than the insurance industry. The insurance industry is bad but at least they have incentives to lower hospital and drug costs. The same can't be said about the other two players which have the opposite goal.

Now if we had a single payer system this would all be moot since hospitals could consolidate all they wanted and drug companies could play all the games they wanted and it wouldn't matter. A single payer will always trump both groups in terms of negotiating power. That said, using Medicare in that role is a good start. I'm just not sure it'll amount to much.

 

Certainly true with the drug industry, but I disagree on the hospital industry. There are some very real reforms there, from pay-per-procedure to recidivism rates to billing structures. And using the power of Medicare to ram through some of those reforms helps create a pathway for the insurers to follow suit. Long way to go and its unclear if it will work, but I think there are definitely some reforms there in way hospitals work. The PWC link I posted above specifically credits some of these hospital payment changes for creating some of the savings.

 

I don't know if it is possible through executive order (Major?), but if so, it is time for rate setting on a national level.

 

The thing is that there is a cost for those adult children to remain on a parent's group plan. My uninsurable daughter cost over $700/month at age 23-26...

 

I don't know enough about executive orders, but it doesn't seem to me that anything like that would be viable or legal because it's not just something the executive department would be doing - you'd be interfering in transactions between two private entities (hospital/doctor and insurer).

 

Surely, price controls similar to the rate setting for Medicare/Medicaid are applicable in a broader setting?

 

Well, my understanding of an Executive Order is just that it directs parts of the Executive Dept on how to do their jobs, what to prioritize, etc. But I'm not sure it would allow them to get involved in something that they don't already have a role in - for example, negotiating deals between an insurer and a hospital. That said, I don't really know too much about executive orders or their limits, so I could be completely wrong on this.

 

Often more than buying a kid their own policy, assuming they are healthy.